The agreement between American Airlines, US Airways, the US Department of Justice and the states suing to block the merger to settle their lawsuits clears the way for AA-US to merge.
This has implications for the Big Four airframe and the engine manufacturers who have been living in some uncertainty. Here’s the rundown:
American and US Airways have large orders with Airbus: American for the A320ceo and neo family and US Airways for the A320ceo family and A350-800/900.
American is taking delivery of the A319ceo and A321ceo. The neo comes several years into the future. American has been taking a large number of A319s, while US Airways have been up-gauging its Airbus single aisle orders, passing on the A319 in favor of the A320ceo or A321ceo. US Airways management, which will take over the New American Airlines, may elect to change the mix within the 18 month lead time limitations.
The more interesting question is what US Airways will do with its A350-800 order. US Airways, along with Hawaiian Airlines, is now the largest customer for the -800. Airbus has been shifting customers from the -800 to the -900 and the -1000, in part to de-risk the program and in part because the larger models are more profitable for Airbus. But some customers elected to switch because the economics of the larger capacity -900 are better than the smaller -800 while operating costs are about the same.
Now that AA and US will combined, the -800 seems surplus when the large order held by American for the Boeing 787-8/9 is considered. The US Airways management could elect to drop the -800 in favor of the 787. Such would unlikely be a total loss for Airbus, however: New American would likely up-gauge to the A350-900 or even the A350-1000, or order more A320neos to keep Airbus “whole.”
US Airways hasn’t ordered a Boeing airplane since the days of the 737 Classic or 757/767, and the current management has been retiring all of them as fast as they could. Now they’re solidly back in Boeing territory. “Old” American has a large order of 737NGs and 737 MAXes in addition to the 787 orders. Old American is only taking the 737-800 and the New American will continue this type and probably select only the 737-8 MAX to fulfill that commitment. But we don’t look for any burst of new orders.
Bombardier and Embraer
A large order to recapitalize the American Eagle regional jets stalled because of the anti-trust lawsuit. With the settlement, Bombardier and Embraer resume their competition for this order. Bombardier offers the CRJ700/900 and Embraer offers the E-170/175/190. Union Scope Clause will influence the number and size of the airplanes. Bombardier pits a more economical CRJ against the more comfortable E-Jet. A decision was supposed to happen last month until the lawsuit was filed. This may slip into 1Q2014, though it’s certainly possible it could come before the end of the year. Each OEM needs the order to fill production slots and a thin backlog, though Embraer is in better shape on this score than Bombardier.
Rolls-Royce is the sole engine provider for the A350, so the outcome of the A350-800 order is of more than passing interest. American selected GE as the engine provider for the 787, so Rolls could come out on the short end of any order adjustments.
CFM is supplying the engines for the A319ce0s and International Aero Engines for the A321ceos. But Old American hasn’t selected engines for the neo family. US Airways, following the combination of Old US Airways and America West Airlines, has CFM56 and IAE V2500 engines on its ceo fleet. US was a CFM operator and America West V2500s. CFM and Pratt & Whitney, majority shareholder of IAE, will compete vigorously for the neo order, and each will try and leverage the ceo deals. CFM has additional leverage. It supplies the engines on the 737NG and 737 MAX and sibling GE Aviation is on the 787, as well as American’s 767 and 777-300ER fleet. CFM/GE has the ability to offer a “global” commercial deal PW/IAE would not be able to match.
OEMs will be engaged in strong competition over the coming months at the New American. It will be interesting to see how this plays out.